The DCIT, Cirlcle-1(1), Baroda V. M/s. Aditya Medisale Ltd., Baroda

ITA 1665/AHD/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0434 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-02-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI SHRI O P VAISHNAV
• Keywords: Earning of tax free income; Cost of acquisition; Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R.MEENA, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1665/AHD/2009 A.Y. 2005-06 2. ./ I.T.A. NO.1666/AHD/2009 A.Y. 2006-07 THE DCIT CIRCLE-1(1) BARODA % / VS. ADITYA MEDISALE LTD. 402, 4 TH FLOOR, RK CENTRE FATEHGUNJ MAIN ROAD FATEHGUNJ ./ ./ PAN/GIR NO. : AABCA 9317 J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI S.N.SOPARKAR, SR.ADV.WITH SHRI PARIN SHAH REVENUE BY : SHRI ALOK JOHRI CIT-DR SHRI O.P.VAISHNAV, CIT-DR / DATE OF HEARING : 05/02/2013 !' / DATE OF PRONOUNCEMENT : 22/3/13 #$ / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN FILE BY THE REVENUE DE PARTMENT ARISING FROM THE ORDERS OF LD.CIT(A)-I, BARODA BOTH DATED 16.3.2009 PERTAINING TO AYS 2005-06 & 2006-07. 2. GROUND NO.1 FROM AYS 2005-06 & 2006-07ARE IDENTI CALLY WORDED; REPRODUCED BELOW:- ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 2 - 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.35, 85,857/- (RS.30,49,530/- FOR A.Y. 2006-07) MADE OUT OF THE I NTEREST CLAIMED U/S.36(1)(III), BEING THE DIFFERENTIAL AMOU NT OF INTEREST PAID ON THE BORROWINGS AND THAT CHARGED ON THE ADVA NCES TO ASSOCIATE CONCERNS, INCLUDING M/S.SUN PETROCHEMICAL S PVT.LTD., MADE WITHOUT ANY COMMERCIAL EXPEDIENCY. 1(B) THE LD CIT(A) FAILED TO TAKE NOTE OF THE RATIO OF CIT VS. H.R.SUGAR FACTORY PVT.LTD. 187 ITR 363 (ALL) DECIDE D ON IDENTICAL FACTS, HOLDING THAT THE DIFFERENTIAL AMOU NT OF INTEREST PAID @ 8% ON THE FUNDS BORROWED FOR CARRYING ON BUS INESS BUT ADVANCED TO DIRECTORS @ 5% WAS NOT ALLOWABLE AS DED UCTION. 1(C) THE CIT(A) FAILED TO APPRECIATE THE LEGAL PR INCIPLE THAT, THE AFFAIRS OF THE ASSESSEE BEING IN HIS SPECIAL KNOWLE DGE IN TERMS OF SECTION 106 OF THE EVIDENCE ACT, THE ONUS U/S.36(1) (III) LIES ON THE ASSESSEE TO PROVE THAT EACH LOAN IS USED FOR THE PU RPOSES OF THE BUSINESS AND THERE IS NO PRESUMPTION IN LAW THAT IT IS OWN CAPITAL OR SURPLUS FUNDS THAT WERE DIVERTED FOR NON-BUSINES S PURPOSES, AS SETTLED IN THE CASES OF KISHANCHAND CHELLARAM VS CI T 114 ITR 654 (BOM), R.DALMIA VS CIT 133 ITR 169 (DEL), CIT V S M.S. VENKATESHWARAN 222 ITR 163 (MAD), K.SOMASUNDARAM & BROTHERS VS CIT 238 ITR 939 (MAD), CIT VS MOTOR GEN ERAL FINANCE LTD. 254 ITR 449 (DEL) [CONFIRMED BY THE SU PREME COURT: 267 ITR 381] AND CIT VS ABHISHEK INDUSTRIES LTD. 286 ITR 01 (P&H). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDERS BOTH PASSED U/S.143(3); RESPECTIVELY DATED 2 7.12.2007 AND 05/12/2008, WHEREIN IT WAS MENTIONED THAT THE ASSES SEE-COMPANY IS IN THE BUSINESS OF TRADING OF PHARMACEUTICAL PRODUCTS AS A DISTRIBUTOR. ON SCRUTINY OF ACCOUNTS, IT WAS NOTED THAT THE ASSESSE E-COMPANY HAD CHARGED INTEREST FROM ITS SISTER-CONCERNS; AT LOWER RATE, I .E. 9.5% OR ONLY 9%. 2.1. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSES SEE HAD PAID A HIGH RATE OF INTEREST AT 10.5%, HENCE CLAIMED EXCESSIVE INTEREST EXPENDITURE. ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 3 - A DIFFERENTIAL AMOUNT WAS CALCULATED WHICH WAS RESP ECTIVELY TAXED AT RS.35,85,857/- FOR AY 2005-06 AND RS.30,49,530/- FO R AY 2006-07 BY INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF TH E ACT. IT HAS ALSO BEEN NOTED BY THE AO THAT IN THE PAST AYS, I.E. 2001-02 & 2003-04, THE CIT(A) HAS GIVEN A DECISION IN ASSESSEES FAVOUR. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS FOLLOWED THE ORDERS OF HIS PREDEC ESSOR AND DELETED THE ADDITION. 3.1. FROM THE SIDE OF THE REVENUE, LD.CIT-DRS MR.AL OK JOHRI AND MR.O.P.VAISHNAV APPEARED AND PLACED RELIANCE ON THE FOLLOWING ORDERS THROUGH A WRITTEN SUBMISSION; REPRODUCED BELOW:- A. CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1: RELIED ON BY DEPARTMENT IN GROUNDS OF APPEAL. WITH DUE REGARDS IN THIS CASE HONBLE PUNJAB & HARY ANA HIGH COURT DISSENTED FROM THE HONBLE ALLAHABAD CASE CIT VS. READICO KHAITAN LTD. (2005) 274 ITR 354 WHICH HAS BEEN RELIED ON BY THE HONBLE ITAT IN THE CASE OF APPELL ANT IN A.Y. 1998-99 WHICH HAS BEEN FOLLOWED IN SUBSEQUENT YEARS ORDERS. B. K. SOMASUNDARAM & BROTHERS VS. CIT 238 ITR 93 9 (MAD.) THIS CASE WAS RELIED BY THE A.O. IN THE ASSESSM ENT ORDER. C. CIT VS. M.S. VENKATESWARAN 222 ITR 163 (MAD.) REL IED ON BY DEPT. IN GROUNDS OF APPEAL. D. CIT VS. MOTOR GENERAL FINANCE LTD. 254 ITR 449 (D EL.): RELIED ON BY DEPT. IN GROUNDS OF APPEAL. E. CIT VS. H.R. SUGAR FACTORY (P) LTD. 187 ITR 363 ( ALL.): RELIED ON BY DEPARTMENT IN GROUNDS OF APPEAL. F. PUNJAB STAINLESS STEEL INDS. VS. CIT & ANR. 324 I TR 396. G. CIT VS. GLAXO SMITHKLINE ASIA (P) LTD. 236 CTR 11 3 (SC) . ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 4 - 4. NOW BEFORE US AN ORDER OF THE ITAT D BENCH AHM EDABAD IN ASSESSEES OWN CASE BEARING ITA NO.3974/AHD/2007 PE RTAINING TO AY 2004-05 TITLED AS THE DY.CIT VS. ADITYA MEDISALES LTD. DATED 4 TH FEBRUARY, 2011 HAS BEEN CITED, WHEREIN THE ISSUE OF INTEREST DISALLOWANCE U/S.36(1)(III) HAS BEEN DECIDED IN FAVOUR OF ASSES SEE BY FOLLOWING FEW ORDERS OF THE TRIBUNAL ALSO DECIDED IN ASSESSEES O WN CASE IN ITS FAVOUR IN THE PAST. IN THE PAST ITAT D BENCH HAS TAKEN A V IEW FOR AYS 1999- 2000, 2000-01, 2001-02, 2002-03 & 2003-04 IN ITA NOS.3272/AHD/2002, 1623/AHD/2003, 1353 & 2180/AHD/2 005 AND ITA NO.08/AHD/2007 RESPECTIVELY VIDE ORDER DATED 30/09/ 2010 IN ASSESSEES FAVOUR AGAIN BY FOLLOWING THE ORDER OF THE TRIBUNAL PRONOUNCED IN ASSESSEES OWN CASE FOR AY 1998-99 IN ITA NO.1233/A HD/2002, WHEREIN IT WAS HELD THAT THE ASSESSEE HAD ITS OWN SUBSTANTI AL INTEREST-FREE FUNDS OUT OF WHICH ADVANCES HAVE BEEN MADE. AN ANOTHER N OTING HAS BEEN MADE THAT THE REVENUE HAD NOT MADE OUT A CASE THAT INTEREST BEARING BORROWED FUNDS HAVE BEEN DIVERTED TO THE GROUP CONC ERNS BY CHARGING LOWER RATE OF INTEREST. FOR THE YEARS UNDER CONSID ERATION, IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD FROM THE SIDE OF THE REVENUE, WE ARE LEFT WITH NO OPTION BUT TO FOLLOW THE PAST P RECEDENT AS HELD IN ASSESSEES FAVOUR VIDE SERIES OF ORDERS CITED SUPRA . THEREFORE, THE RESULT IS THAT THE GROUND AS RAISED BY THE REVENUE STOOD C OVERED IN ASSESSEES FAVOUR, HENCE DISMISSED. 5. GROUND NO.2 FOR AYS 2005-06 & 2006-07 IS AGAIN I DENTICALLY WORDED; REPRODUCED BELOW:- ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 5 - 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DI FFERENTIAL AMOUNT OF INTEREST OF RS.4,79,22,795/- (FOR A.Y. 20 06-07 OF RS.65,10,131/-) ON OVERDUE BILLS OF M/S.SUN PHARMA CEUTICALS INDUSTRIES LTD. (SPIL), AN ASSOCIATE CONCERN, PAID @ 15% WHEN THE ASSESSEE HAD CHARGED INTEREST ON ITS ADVANCES @ 9.5% TO 9% AND HAD PAID INTEREST TO THE BANKS @ 13% ONLY (FOR A.Y.2006-07 9% AND HAD PAID INTEREST TO THE BANKS @ 11% ONLY), WHICH CLEARLY REFLECTED COLLUSIVE NATURE OF PAYMENT OF EXCESSIVE AMOUNT IN THE FACE OF M/S.SPIL BEING ENTITLED TO DEDUCTION OF 100 % PROFITS U/S.80IB, THUS RESULTING IN OVERALL AVOIDANCE OF TA X BY AN ARRANGEMENT BETWEEN THE ASSESSEE AND ITS ASSOCIATE CONCERN. 5.1. EVEN IN RESPECT OF THIS ISSUE, THE OBJECTION O F THE AO WAS THAT EXCESSIVE INTEREST WAS PAID TO SUN PHARMACEUTICAL I NDUSTRIES LTD. (SPIL) @ 15% ON OVERDUE BILLS. ACCORDING TO AO, THE ASSES SEE WAS NOT GIVING CONSISTENT TREATMENT IN RESPECT OF CHARGING OF INTE REST AND PAYMENT OF INTEREST FOR LOANS TAKEN AND ADVANCES GIVEN. THE F IRST APPELLATE AUTHORITY HAD FOLLOWED HIS PREDECESSORS DECISION FOR AY 2004- 05 AND ALLOWED THE ISSUE IN ASSESSEES FAVOUR. 6. AS NOTED HEREINABOVE WHILE DECIDING THE APPEAL O F THE ASSESSEE FOR AY 2004-05 (ITA NO.3974/AHD/2007-SUPRA) VIDE AN ORD ER DATED 04/02/2011, IT WAS NOTED THAT THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF ASSESSEE BY ITAT D BENCH AHMEDABAD IN A CONSOL IDATED ORDER RELEVANT FOR A.Y. 1999-2000 TO 2003-04 BEARING ITA NOS. ITA NOS.3272/AHD/2002, 1623/AHD/2003, 1353 & 2180/AHD/2 005 AND ITA NO.08/AHD/2007-SUPRA ORDER DATED 30/09/2010. IN TH E SAID ORDER OF THE TRIBUNAL, ITAT D BENCH FOLLOWED AN EARLIER ORDER; PRONOUNCED IN ASSESSEES OWN CASE FOR A.Y. 1997-98 IN ITA NO.492/ AHD/2001 DATED ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 6 - 28/03/2008, WHEREIN IT WAS HELD THAT ONUS FOR APPLI CATION OF THE PROVISIONS OF SECTION 40A(2)(A) IS ON THE REVENUE A ND THAT THERE WAS NO BASIS FOR HOLDING THAT AN EXCESSIVE RATE OF INTERES T WAS PAID. IT IS ALSO WORTH TO MENTION THAT THERE WAS AN ORDER OF THE HON BLE GUJARAT HIGH COURT IN ASSESSEES CASE (CIT VS. ADITYA MEDISALES LTD. - TAX APPEAL NO.559 OF 2009 DATED 4.5.2010), WHEREIN IT WAS OPIN ED THAT THE CIT(A) AS WELL AS TRIBUNAL HAVE UPON APPRECIATION OF THE EVIDENCE FOUND THAT THE REVENUE HAS NOT BEEN ABLE TO MAKE OUT ANY CASE FOR APPLYING THE PROVISIONS OF SECTION 40A(2)(A) AND THAT INTEREST E ARNED ON UNSECURED BORROWINGS IS ALWAYS HIGHER THAN THE RATE OF INTERE ST PAID TO THE BANK ACCOUNT FROM WHERE LOAN RAISED; HENCE ACCEPTED THAT INTEREST PAID TO SUN PHARMACEUTICALS @ 24% P.A. TO BE REASONABLE. WE TH EREFORE HOLD THAT SINCE THE TRIBUNAL/HIGH COURT IS TAKING A CONSISTEN T VIEW IN FAVOUR OF THE ASSESSEE IN THE PAST, THEREFORE RESPECTFULLY FOLLOW ING THESE DECISIONS FOR THE YEAR UNDER CONSIDERATION, WE HEREBY HOLD THAT T HE REVENUE HAS NO FORCE IN THE GROUNDS RAISED FOR BOTH THE YEARS, HEN CE DISMISS THE SAME. 7. THE THIRD GROUND OF A.Y. 2005-06 READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE U/ S.14A OF THE EXPENSES OF RS.13,56,629/- INCURRED FOR EARNING DIV IDEND INCOME EXEMPT U/S.10(33). 7.1. THE THIRD GROUND OF A.Y. 2006-07 READS AS UNDE R: 3(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE U/ S.14A(2) R.W.S. RULE 8D RS.21,33,019/- INCURRED FOR EARNING DIVIDEN D INCOME EXEMPT U/S.10(34) R.W.S.115-O. ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 7 - 3(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) DID CONSIDER THE DECISION OF HON .ITAT, SPL.BENCH, MUMBAI IN ITA NO.8057/MUM/2003 IN THE CA SE OF M/S.DURGA CAPITAL MANAGEMENT PVT.LTD. FOR A.Y. 2001 -02, WHERE IT WAS CLEARLY HELD THAT THE PROVISIONS OF SECTION 14A(2)&(3) OF THE I.T.ACT BEING CLARIFICATORY IN NATURE WILL APPLY RE TROSPECTIVELY EVEN THOUGH THEY HAVE BEEN INTRODUCED BY FINANCE ACT, 20 06 W.E.F. 1.4.2007. SECTION 14A HAS BEEN INSERTED RETROSPECT IVELY BY FINANCE ACT, 2001, WITH EFFECT FROM 1.4.1962. HON. SPECIAL BENCH HAS HELD THAT PROVISIONS OF SECTION 14A(2) & 14A(3) ARE ALSO RETROSPECTIVE IN NATURE AND IN RESULT RULE 8D WILL ALSO APPLY ACCORDINGLY. 7.2 FACTS IN BRIEF IN RESPECT OF ABOVE GROUNDS FO R AY 2005-06, 2006-07 WERE THAT THE ASSESSEE HAD RECEIVED THE DIVIDEND IN COME OF RS.1,30,66,287/- (AY 05-06) AND RS.1,50,76,485/- (A Y 06-07) STATED TO BE ON EQUITY SHARES OF SUN PHARMACEUTICALS LTD. D IVIDEND WAS CLAIMED EXEMPT U/S.10(34) R.W.S. 115-O OF IT ACT. THE ASSE SSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE EXPENSES LIKE INTEREST ON THE FUNDS BORROWED FOR INVESTMENT RELATING TO THE EARNING OF EXEMPT IN COME BE NOT DISALLOWED U/S.14A OF IT ACT. FROM THE SIDE OF THE ASSESSEE, A DETAILED SUBMISSION WAS MADE, BUT THE A.O. HAD HELD THAT IN THE ABSENCE OF FUND- FLOW-STATEMENT AN AMOUNT @ 10% OF THE DIVIDEND REC EIVED WAS TO BE DISALLOWED TOWARDS INTEREST INCURRED TOWARDS INVEST MENT IN EXEMPT INCOME. RESULTANT AN AMOUNT OF RS.13,06,629/- FOR AY 05-06 WAS TAXED. FOR AY 06-07, THE AO HAD HELD THAT INTEREST BEARING FUNDS WAS UTILIZED IN FINANCING THE COST OF ACQUISITION OF SHARES. THE P ROVISION OF RULE 8D R.W.S. 14A WERE APPLIED AND A DISALLOWANCE OF RS.21 ,33,019/- WAS MADE. ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 8 - 7.3. WHEN THE MATTER REACHED TO THE FIRST APPEAL; I N BOTH THE YEARS, THE LD.CIT(A) HAS FOLLOWED AY 2004-05 VERDICT OF HIS PR EDECESSOR AND DELETED THE ADDITION. 7.4. AFTER HEARING BOTH SIDES AND ON PERUSAL OF T HE COMPILATION FILED BEFORE US, AT THE OUTSET, IT IS WORTH TO MENTION TH AT IN AY 2004-05, ITAT D BENCH AHMEDABAD VIDE ORDER DATED 04/02/2011 (IT A NO.3974/AHD/2007) IN THE APPEAL FILED AS DCIT VS. A DITYA MEDISALES LTD; WHEREIN THE ISSUE WAS DECIDED IN THE FOLLOWING MANNER:- 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER DISALLOWED INTEREST EXPENDITURE AT THE RATE OF 10% ON A LOAN OF ` 4 CRORES FOR THE PERIOD OF 3 MONTHS AND 2 DAYS WHICH AMOUNTED TO ` .10,08,2197- BY INVOKING PROVISIONS OF SECTION!4A AS THE FUNDS WERE UTILIZED IN INVESTMENTS FOR EARNING EXEMPT INCOME OF ` .1,92,58,879/-. HE FURTHER MADE A DISALLOWANCE FOR AN ESTIMATED SUM OF ` .50,000/- TOWARDS OTHER EXPENSES IN EARNING EXEMPT INCOME. SIMILARLY, HE ALSO DISALLOWED 10% OF DIVIDEND INCOM E OF ` .1,01,50,123/- TOWARDS INTEREST AND MISCELLANEOUS EXPENSE FOR EARNING EXEM PT INCOME FOR INVESTMENT MADE IN EARLIER YEARS AND DISALLOWED `.10,15,012/- UNDER SECTION 14A OF THE ACT. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) DELETED THE DISALLOWANCE ON THE GROUND THAT THE DISALLOWANCE WA S MADE BY THE LEARNED ASSESSING OFFICER WITHOUT ANY CORRELATION OR NEXUS HAVING BEEN ESTABLISHED BETWEEN SUCH EXPENDITURE AND DIVIDEND INCOME. ACCORDING TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IT WAS A NOTIONAL DISALLOWANCE WHICH CANNOT BE UPHELD. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED T HAT THE ISSUE SHOULD BE RESTORED TO THE FILE OF THE LEARNED ASSESSING OFFIC ER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX (2010 ) 328 ITR 81(BOM). THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS AGREED TO RESTORING BACK THE ISSUE REGARDING DISALLOWANCE OF INTEREST OF ` .10,08,219/- AND OTHER EXPENSES TO THE FILE OF THE LEARNED ASSESSING OFFICER AS INTEREST A ND OTHER EXPENDITURES HAVE BEEN DISALLOWED BY THE LEARNED ASSESSING OFFICER WITH RE GARD TO INVESTMENTS MADE IN THIS YEAR. REGARDING THE DISALLOWANCE OF INTEREST AND OT HER EXPENSES OF ` .10,15,012/- THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT AS NO DISALLOWANCE FOR INTEREST AND OTHER EXPENSES WAS MA DE IN EARLIER YEARS THEREFORE, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) SHOULD BE CONFIRMED IN RESPECT THEREOF. WE FIND FROM THE ASSESSMENT ORDER THAT THE LEARNED ASSESSING OFFICER HAS OBSERVED AS UNDER :- 'REGARDING BALANCE AMOUNT OF DIVIDEND OF ` .L,01,50,123/-, THE ASSESSEE SUBMITTED THAT THIS DIVIDEND HAS BEEN RECEIVED OUT OF INVESTMENTS MADE IN EARLIER YEARS. IN THE ABSENCE OF ANY FUND FLOW STAT EMENT AND OTHER DETAILS THEREFORE, AN AMOUNT @10% OF THE AMOUNT RECEIVED, I.E. ` .1,01,50,123/- IS ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 9 - DISALLOWED TOWARDS INTEREST AND OTHER MISCELLANEOUS EXPENSES INCURRED IN RELATION TO THE INVESTMENTS MADE FROM WHERE THIS EX EMPT INCOME HAS BEEN RECEIVED. IT IS ALSO MENTIONED THAT SIMILAR DISALLO WANCE WAS MADE IN EARLIER YEAR ALSO. THEREFORE, THE DISALLOWANCE IS OF `. 10,15,012/-. THEREFORE, THE TOTAL DISALLOWANCE UNDER SECTION 14A COMES TO `. 20,73,231/-.' THUS, IT IS OBSERVED THAT THE DISALLOWANCE OF INTER EST AND OTHER EXPENDITURE WAS ALSO MADE IN EARLIER YEARS ON EARNING OF EXEMPT DIVIDEND INCOME. THEREFORE, THE PLEA OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE THAT AS NO DISALLOWANCE OF INTEREST AND OTHER EXPENSES WAS MADE IN EARLIER YEA RS THEREFORE, THE DELETION OF SUCH DISALLOWANCE BY THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) IN THE PRESENT YEAR SHOULD BE CONFIRMED CANNOT BE ACCEPTED. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE E NTIRE ISSUE OF DISALLOWANCE OF INTEREST AND OTHER EXPENDITURE UNDER SECTION.14A BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE M FG. CO. LTD. V. DEPUTY COMMISSIONER OF INCOME-TAX (2010) 328 ITR 81(BOM) AF TER ALLOWING REASONABLE AND PROPER OPPORTUNITY TO THE ASSESSEE. THUS THIS GR OUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7.5. ON HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT FOR THE YEAR UNDER CONSIDERATION A FRESH ADJUDICATION IS REQUIRE D ON THE PART OF THE AO; SPECIALLY IN THE LIGHT OF THE LATEST ORDERS OF THE HONBLE COURTS; WHEREIN THE APPLICABILITY OF SECTION 14A VIS--VIS RULE 8D HAS BEEN STREAMLINED; HENCE TO BE FOLLOWED. WITH THESE DIRE CTIONS, THESE GROUND OF THE REVENUE ARE HEREBY ALLOWED ONLY FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THESE TWO APPEALS OF THE REVENUE ARE PARTLY ALLOWED. SD/- SD/- ( %..&' ) ( & & ' ) # () # ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/ 3/2013 %.., .)../ T.C. NAIR, SR. PS ITA NOS.1665 & 1666/AHD/2009 DCIT VS. ADITYA MEDISALE LTD. ASST.YEARS 2005-06 & 2006-07 - 10 - '' ( )*+ ,'+- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. + ,- . / CONCERNED CIT 4. . () / THE CIT(A)-I, BARODA 5. 123 )),-, ,-', 4&#+# / DR, ITAT, AHMEDABAD 6. 356 7 / GUARD FILE. ''% / BY ORDER, 1 ) //TRUE COPY// ./ / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION DATED 7.2.13&19.3.13 (DICTATIO N-PAD 9 PAGES ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.2.13&19.3.13 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 22.3.13 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 22.3.13 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER